Purchase of Bitcoin

Johnny has been writing a couple posts about his Bitcoin investment. He’s done very well over the last couple years and is even receiving portions of his paycheck in Bitcoin.

I decided to get involved too with a couple small purchases to get my feet wet.

I’m hoping Johnny will write about this in more detail, but there are a ton of places to buy bitcoins online. Just Google “buy bitcoins” and you’ll see many different sites. The two that I decided to try were Gemini and Circle.

Gemini is one that Johnny really likes. It is the world’s first “fully regulated, fully compliant, New York-based digital asset exchange for both individuals and institutions.” It is regulated by the New York State Department of Financial Services (NYSDFS).

Circle is not an exchange but rather a company that seems exactly Square Cash or Venmo, if you’ve used either of those. Basically you sign up for an account, link a debit card and then you can send money in USD, bitcoin, euro, or GBP instantly to anyone. Circle is where I have my 1.28759409 BTC stored. (FYI, the link for Circle is a referral link, so if you sign up and add your debit card and send someone $25, we both get $5 added to our account.)

Circle was also one of the first apps to support integration directly into the extensions section of Messages in iOS 10, allowing you to use Circle to send cash directly to friends while chatting with them.

One of the really cool things about Circle is that you can instantly convert your account between any of the currencies. I could right now convert my account to USD and I’d get $793.60 in my account at the time of this post. Conversions like this may trigger a taxable event due to the volatility of Bitcoin pricing.

To compare the two sites for buying Bitcoin I decided to buy exactly 0.4 BTC on each platform at the same time. Gemini is a true exchange so the price fluctuates in real time. The nice thing about Circle is that you can instantly buy bitcoin using your debit card and pay no direct fee. I wanted to compare this to Gemini, which seems to have slightly cheaper bitcoin prices but does have a very small fee. I just checked now and the fee amounts to 75 cents for buying $300 worth of bitcoin on the exchange at market prices.

So, Gemini ended up saving me $1.50 on this transaction despite Circle having no “fee.”

In the future I’ll definitely be using Gemini to buy more bitcoin.

This does raise the possibility of arbitrage…buying the cheaper bitcoin on Gemini and then transferring it to Circle to sell. This could possibly work but you’d first have to allow the funds to settle in Gemini before being able to transfer the bitcoin out. Also, both Circle and Gemini have limits on the amount of bitcoin you can buy each day. This is to protect from fraud. Eventually these limits will increase and you can do things to authenticate yourself (like sending in identification, utility bills, etc). However, is $1.50 arbitrage opportunity per roughly every $230 worth it? I’m not sure that it is.

Is anyone else speculating in Bitcoin? Are you using it as an investment or do you actually spend Bitconi at the various places online and in-store that accept it?

I learned about it mostly from Johnny too. We’ll have to post a link to an article that describes how Nasdaq and the NYSE are looking into using the blockchain technology behind Bitcoin to authenticate transfer of investment funds. The transactions would still be in USD but the blockchain would allow near instantaneous confirmation of funds availability and stop the need to have a three-day holding period for funds to settle. It’s pretty remarkable use of the technology. IBM, one of the stocks that I own, is at the forefront of incorporating it into our developed systems. Definitely a cool field to stay apprised of.